U.S. producer prices fall more than expectations in April on large decline in energy prices

The U.S. producer price index data for April came in weaker than expectations. The headline index came in at -1.2 percent year-on-year, as compared with consensus expectations of -0.5 percent. This is only slightly better than the record low of -1.4 percent seen in 2015, noted Daiwa Capital Market Research in a report. The core producer price index fell 0.3 percent year-on-year, the first reading in negative territory.

Delving into details, the energy component drove the fall in the PPI with a month-on-month fall of 19 percent. However, food and core components also contributed to the fall in the headline print with declines of 0.5 percent and 0.9 percent, respectively.

Within core components, consumer goods prices remained the same, but prices of capital goods dropped, as did prices of goods purchased by the government and destined for export. Export prices were particularly weak, falling 1.1 percent. Service prices included in the core component were quite soft, falling 1.2 percent. Trade services rose 1.6 percent, but this volatile area is not included in the PPI definition of core.

“The PPI often moves erratically, and thus we do not place great weight on the measure when assessing the inflation environment. At the same time, we do not ignore the index, and the pronounced softness in April suggests a notably soft pricing environment”, added Daiwa Capital Market Research.